MIT ICAT Recent Trends in Air Cargo Rapid growth in demand for air cargo Intra-Asia is the largest true air freight market Even during Asian economic crisis air freight traffic grew Forecasts for continued traffic growth at 6% per year Falling real yields (revenue per ton-mile) Average 2.5% decline in yields (CPl adjusted) Growth in international trade has increased trip length, associated with lower tariffs per mile Wide-body aircraft have unused belly capacity, viewed by passenger airlines as virtually“ costless” Passenger airlines have become price leaders in air freight Regulatory liberalization has spurred price competition Lower tariffs further stimulate demand but also cause airlines to focus on lowering unit costsMIT ICAT MIT ICAT Recent Trends in Air Cargo • Rapid growth in demand for air cargo – Intra-Asia is the largest true air freight market – Even during Asian economic crisis air freight traffic grew – Forecasts for continued traffic growth at 6% per year • Falling real yields (revenue per ton-mile) – Average 2.5% decline in yields (CPI adjusted) – Growth in international trade has increased trip length, associated with lower tariffs per mile – Wide-body aircraft have unused belly capacity, viewed by passenger airlines as virtually “costless” • Passenger airlines have become price leaders in air freight – Regulatory liberalization has spurred price competition • Lower tariffs further stimulate demand, but also cause airlines to focus on lowering unit costs